Hydro-quebec has enough to meet demand - CEO
Hydro-quebec has enough energy to meet both domestic and out-of-province demand, even after low water levels led the utility to curb power exports last year as a precautionary measure, chief executive Michael Sabia insists.
Canada’s biggest electricity producer on Wednesday reported that 2023 net income dropped 28 per cent to $3.29 billion. It also cut the dividend it pays to its sole shareholder, the Quebec government, by 26 per cent to $2.5 billion — which is likely to affect provincial finances at a time when the economy is slowing.
Smaller-than-average rainfall in northern Quebec, where several of the company’s dams and generating stations are located, left reservoirs with less water than in previous years. The decision to reduce exports cost Hydro-quebec about $550 million, Sabia said.
“The issue essentially is that there wasn’t enough snow and rain in the places where we need it,” Sabia told reporters Wednesday. “We had lower water levels in our reservoirs, so we took the decision to reduce our exports to keep energy available for our clients in Quebec. Let’s be clear: Hydroquebec has enough energy for demand in Quebec and its long-term commitments for neighbouring markets.”
Profit in 2024 could fall yet again, to a range between $2.2 billion and $2.7 billion, according to forecasts contained in the company’s annual report.
“That depends if precipitation later in the winter or during the spring is such that the water levels in our reservoirs are up,” Sabia said.
Hydro-quebec went through similar situations in 2004 and 2014, and “relative to those years our water levels are actually better,” Sabia said. “I do want to emphasize that we don’t consider this a crisis in any way. This is just something that’s sound management to ensure that we manage our operations in a way that Quebecers have the power that they need when they need it.”
“Obviously we can’t make it rain, as much as we’d like to, hence the range of 2.2 to 2.7” billion dollars, he added.
Hydro-quebec is three months into a 12-year, $185-billion plan to boost output, improve energy efficiency and slash power outages as demand in the province soars.
Priorities this year include consulting stakeholders on the 2035 action plan, improving service quality, boosting output, developing better relations with First Nations communities and making Hydro-québec more efficient, Sabia said Wednesday.
Export revenue fell 19 per cent last year to $2.37 billion, the company said. Electricity volumes slumped 35 per cent to their lowest level in at least 10 years.
Hydro-quebec’s hedging strategy nevertheless allowed the company to generate an average price of 10.3 cents per kilowatt-hour on export markets. That’s almost double the 5.2-cent market average.
Electricity sales within Quebec brought in $13.5 billion, 2.1 per cent more than in 2022.
Operating expenses rose 7.1 per cent to $4.13 billion as the utility accelerated servicing and maintenance work and spent more on digital services.
Hydro-quebec is planning to spend $3.7 billion this year to improve service quality, Sabia said. That’s 25 per cent more than two years ago.
“Service quality has degraded for the past decade, and it must improve,” he said. “The plan for 2024 is to stop the decline and to start seeing a tangible improvement.”
Hydro-quebec is also ramping up efforts to expand output. Spending on such production technologies as wind power and solar energy will rise from $1.6 billion in 2023 to $2.2 billion this year, a first step on the way to an annual budget of up to $9 billion within three or four years, Sabia said.
Several large investors have approached Hydro-quebec to express an interest in financing new power generation facilities, Sabia said. He wouldn’t provide names.
“We’ve had expressions of interest on a whole variety of different things,” the CEO said. Interested parties “come from inside Canada, the United States and elsewhere in the world.”
Sabia also said he’s hopeful of seeing other economic partnership deals with Indigenous communities materialize following the signing last week of a $45-million agreement between the province and the Innu First Nation of Pessamit.
The executive, who attended the signing ceremony, said 2024 has the potential to become “a turning point” in Hydro-quebec’s relations with First Nations communities.
“We’re having a lot of conversations across Quebec with many, many communities,” Sabia said. “There are instances where I would say things have not been done correctly in the past, and there are instances where communities affected by our installations have not really been compensated, or not adequately compensated. So we’re working on that dimension of the issue.”
Discussions also are taking place regarding future energy developments, he said.
“There have been issues in the past, and we have to get past those issues,” Sabia said. “You can’t build the future until you’ve addressed the past.”